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Sample Tax Computation: Minimum Wage Earners under TRAIN




Here is a sample computation showing the applicable tax rules for Minimum Wage Earners (MWE), as reiterated in BIR Revenue Regulations 8-2018.

Tax Rules for Minimum Wage Earners

From the Bureau of Internal Revenue’s (BIR) RR 8-2018:

Minimum wage earners shall be exempt from the payment of income tax based on their statutory minimum wage rates. The holiday pay, overtime pay, night shift differential pay and hazard pay received by such earner are likewise exempt.

Sample Tax Computation: Minimum Wage Earners

Sample Computation

Mr. X, a minimum wage earner, works for 123 Co. Mr. X is not engaged in business nor has any other source of income other than his employment. For 2018, Mr. X earned a total compensation income of P135,000.00.

a. The taxpayer contributed to the SSS, Philhealth, and HDMF amounting to P5,000.00 and has received 13th month pay of P11,000.00. His income tax liability will be computed as follows:

Total Compensation lncomeP135,000.00
Less: Mandatory contributionsP5,000.00
Non-taxable benefits11,00016,000.00
TAXABLE INCOMEP119,000.00
TAX DUEEXEMPT

CONCLUSION: Taxpayer Mr. X is exempt since he is considered a minimum income earner.


b. The following year, Mr. X earned, aside from his basic wage, additional pay of P140,000.00 which consists of the overtime pay (P80,000.00), night shift differential (P30,000.00), hazard pay (P15.000.00) and holiday pay (P15,000.00). He has the same benefits and contributions as in Example (a) above.

Total Compensation lncomeP135,000.00
Add: Overtime, night shift differential, hazard, and holiday pay140,000.00
Total IncomeP275,000
Less: Mandatory contributionsP5,000.00
Non-taxable benefits11,00016,000.00
NET TAXABLE INCOMEP259,000.00
TAX DUEEXEMPT

CONCLUSION: Taxpayer is tax-exempt as an MWE. The statutory minimum wage as well as the holiday pay, overtime pay, night shift differential pay and hazard pay received by such MWE are specifically exempted from income tax under the law.

(To view the full Revenue Regulation and to download a PDF copy of BIR RR 8-2018, click here.)


Source: Bureau of Internal Revenue (BIR www.bir.gov.ph), Department of Finance (DOF www.dof.gov.ph) Philippines

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One thought on “Sample Tax Computation: Minimum Wage Earners under TRAIN”

  1. eric says:

    Is it rigth that in resort they add our Service Charge to our minimun wage to become taxable. even we are MWE.
    Sample : 8,000 minimum wage
    + 17,000. SERVICE CHARGED
    TAX = 2,000

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